>  check if the attribute "option1" exists(How do i do this?),

you've been on this list often enough to have seen this answer 1000 times:
<xsl:if test="@option">...

>  it's not a must it will be there. And if it does,
>   set the variable x = 400 - ( No.of option1 * 10 )
> 
>   Given that the variable had been declared earlier.

You don't declare variables in XSLT you bind them to a value, once they
have a value they keep it.

David

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